Consignment Store Insurance Policy Information
Consignment Store Insurance. Consignment stores have a unique business model, in which the store sells merchandise on behalf of a third party, taking a sizable commission in the process.
Consignment shops accept items from individuals called consignors on a contract basis. The shop displays the items for a specified amount of time. If an item sells, the shop pays the consignor the agreed-upon percentage of the proceeds.
If an item does not sell, the shop either returns it to the owner or donates it to charity as specified in the consignment agreement. The store owner does not take ownership of the item at any time.
While the most common consignment items are used clothing, particularly specialty women's, bridal gowns, maternity wear, and children's clothing, other items such as antiques, CDs or DVDs, computer games, furniture, household goods, musical instruments, or sporting goods, may also be consigned. The shop may also sell a limited variety of new items.
Although many consumers believe consignment stores to be very similar to thrift stores, the main two differences between the two are that consignment stores operate on a for-profit basis, and that the commodities on sale at these stores are in new condition.
Consignment stores selling diverse types of goods can become very successful, but they do face a multitude of risks as well.
Investing in excellent insurance coverage is a key part of your overall risk management strategy as a business owner, so what should you know about the types of consignment store insurance you will need? Discover more in this brief guide.
Consignment store insurance protects your shop from lawsuits with rates as low as $37/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked consignment shop insurance questions:
- What Is Consignment Store Insurance?
- How Much Does Consignment Store Insurance Cost?
- Why Do Consignment Stores Need Insurance?
- What Type Of Insurance Do Consignment Stores Need?
- What Does Consignment Store Insurance Cover & Pay For?
What Is Consignment Store Insurance?
Consignment store insurance is a type of insurance coverage designed specifically for consignment stores. It provides financial protection to the store in the event of damages, theft, or losses that occur on the premises, as well as protection against claims made by customers or employees.
The insurance policy typically covers the consigned items, the store's building, and the store's liability for any accidents or incidents that occur on the premises. It may also provide coverage for business interruption and loss of income in the event of a covered loss.
How Much Does Consignment Store Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small consignment stores ranges from $37 to $59 per month based on location, size, revenue, claims history and more.
Why Do Consignment Stores Need Insurance?
Similar to other businesses, consignment stores can, at virtually any time, be impacted by circumstances beyond their control - sometimes with devastating financial consequences.
Consignment stores face significant hazards unique to their business model in addition to the universal risks almost any commercial venture has to consider.
Like other businesses, consignment stores may be confronted with acts of nature - ranging from lightning strikes to earthquakes and hurricanes. They may be saddled with unexpected costs due to theft, vandalism, or robbery, and of course, accidents that cause fires or floods may also cause severe property damage.
Like other businesses, consignment stores may face lawsuits from customers or employees who are injured on the premises.
Unique risks are associated with the fact that consignment stores warehouse and sell commodities that are not owned by them, but instead by the merchants on whose behalf the consignment store is acting.
The products may be faulty in some way, or your own store's activities could inadvertently damage goods you are selling. In both cases, you could face massive costs if claims are filed against your consignment store.
Not only are certain types of insurance obligatory, carrying consignment store insurance coverage is one of the best and easiest ways to protect your business in the event that shop is struck by any type of major peril.
What Type Of Insurance Do Consignment Stores Need?
The consignment store's location, its size, the types of goods it sells, and its number of employees are just some of the factors that determine what types of insurance you should invest in, as well how high your premiums will be.
Because each consignment store has unique insurance needs, it is vital to consult a skilled commercial insurance broker who understands the nature of your business. With that in mind, the following types of consignment store insurance are important:
- Commercial Property - This kind of coverage safeguards your store from financial losses if the facility is hit by perils that include acts of nature, burglary, vandalism, and fire. It will cover your property damage up to a predefined limit. You should, however, be aware that flood insurance needs to be purchased separately in most cases.
- Commercial General Liability - Consignment stores host so many customers that it is only a matter of time before someone is injured at the store. Likewise, your company's activities may cause accidental damage to third party property. If you find yourself facing a personal injury or property damage claim, this form of insurance will help you cover your legal costs.
- Product Liability - This form of consignment store insurance coverage instead relates to the products you sell; if a consumer were to be injured or face property loss after contact with a commodity you sold, product liability insurance covers the expenses.
- Workers Compensation - When you carry workers comp insurance, you will never have to worry about unexpected expenses if an employee is injured in the workplace, as this coverage takes care of such employees' medical costs as well as any lost income arising from the injury.
you will likely require further types of consignment store insurance not covered here. For this reason, it is crucial to direct your questions to a commercial insurance agent familiar with your field.
Consignment Store's Risks & Exposures
Premises liability exposure is high due to the number of visitors to the store. To prevent slips and falls, there should be good lighting and adequate aisle space. All goods should be kept on easily reached shelves so customers do not pull items down on themselves.
The stock dropped on floors by customers must be retrieved promptly. Floor coverings must be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked.
Sufficient exits must be provided and be well marked, with backup lighting systems in case of power failure. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the business is open after dark, there should be adequate lighting and appropriate security for the area. There should be a disaster plan in place for unexpected emergencies.
Consignment contracts must specify the procedure for buying and selling, whether price negotiations are permitted, how proceeds will be distributed, and how unsold items will be handled. Clear marking to identify ownership of the consigned items is important as well as tracking payments.
Personal injury exposures include allegations of discrimination, invasion of privacy in dressing rooms, and from apprehending and detaining shoplifters, which may result in claims of assault and battery, false arrest or detention, unauthorized or intrusive searches, or wrongful ejection from the premises.
Shoplifting procedures must be fully understood and utilized by all employees.
Products liability exposure is generally low. If the shop consigns children's items, any flammability standards must be met and clearly indicated on the item. The shop should be sure there are no jagged edges on glassware or furniture, and attach labels warning of possible lead exposure to cloisonne jewelry, ceramics, pewter or silver-plated items, and painted toys.
Old baby cribs or bassinets that do not meet current standards pose dangers to infants or toddlers. The store owner may be unaware that an item held for sale is imported, and could be held liable as a product manufacturer.
Workers compensation exposure is moderate due to employees standing for long hours, the use of computers, and stocking which requires lifting and placing items on clothing rods or shelves for display. Continual standing can result in musculoskeletal disorders of the back, legs, or feet. Trips, slips, and falls are common.
When work is done on computers, employees are exposed to eyestrain, neck strain, and repetitive motion injuries including carpal tunnel syndrome. Lifting can cause back injury, hernias, sprains, and strains. Employees should be provided with safety equipment, trained on proper handling techniques, and have conveying devices available to assist with heavy lifting.
Employees picking up items or delivering items to customers will encounter road exposures. Cleaning workers can develop respiratory ailments or contact dermatitis from working with chemicals. In any retail business, hold-ups may occur so employees should be trained to respond in a prescribed manner.
Property exposure is moderate since ignition sources are limited to electrical wiring and heating and cooling systems. These should be maintained and meet current codes for the occupancy. Should a fire occur, the consigned items provide a combustible fire load that may be highly susceptible to water and smoke damage.
As the owner does not take possession of consigned items, the business personal property is generally limited to the racks and other items to display the property, new items for sale, and office equipment. The consignment agreement should clearly spell out who is responsible for insuring the consigned goods. If the shop owner assumes this responsibility, coverage can be on the property form as the personal property of others or can be written on an inland marine bailee customers form.
Individual items may be shoplifted. High-value items may be stolen in larger quantities after hours. Appropriate security measures should be in place including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.
Valuation can be a problem if the shop owner is responsible for covering consigned items. Accurate records should be kept of the description and cost of each item consigned in order to verify the actual cash value of missing, damaged, or destroyed items after a loss.
Business interruption exposures are moderate. While backup facilities are readily available, replacement stock may be difficult to obtain quickly.
Crime exposures are from employee dishonesty and theft of money and securities either from holdup or safe burglary. Background checks should be conducted on all employees handling money. There must be a separation of duties between persons handling deposits and disbursements and reconciling bank statements.
Money should be regularly collected from cash drawers and moved away from the collection area, preferably to a safe on premises. Bank drops should be made throughout the day to prevent a buildup of cash on the premises.
Inland marine exposures are from accounts receivable if the store offers credit, computers to transact sales and monitor inventory, and valuable papers and records for consignees' information. Backup copies of all records, including computer files, should be made and stored off premises. Coverage for customers' goods may be written on a property form or a bailees customers form.
Business auto exposure is generally limited to hired and non-owned for employees running errands. If the store picks up items to be consigned or delivers sold items to customers, any driver must have a valid license and acceptable MVR. Vehicles must be regularly maintained with records kept.
What Does Consignment Store Insurance Cover & Pay For?
Here are some potential reasons why consignment stores may be sued:
Loss or damage of consigned items: Consignment stores accept items from individuals or businesses for sale on their premises. If any of these consigned items are lost, damaged, or stolen, the consignors may sue the store for compensation. For example, if a consignment store experiences a burglary and some of the consigned items are stolen, the consignors may file a lawsuit against the store to recover their losses.
Insurance coverage: A consignment store can have property insurance that covers the loss or damage of consigned items due to theft, fire, or other covered perils. The insurance policy can provide coverage for the replacement value of the consigned items, subject to policy limits and deductibles. This can help the store pay for the replacement or compensation of consigned items and defend against any lawsuits filed by consignors.
Personal injury or property damage claims: Consignment stores are open to the public, and accidents can happen on their premises. If a customer or visitor is injured, or their property is damaged while on the consignment store's property, they may file a lawsuit against the store for damages. For example, if a customer slips and falls on a wet floor in a consignment store, they may sue the store for medical expenses, lost wages, and pain and suffering.
Insurance coverage: A consignment store can have general liability insurance that provides coverage for bodily injury and property damage claims arising from accidents that occur on the premises. The insurance policy can help pay for medical expenses, legal defense costs, and damages awarded by the court in a lawsuit. This can protect the store's assets and finances from the financial impact of such claims.
Contract disputes with consignors: Consignment stores typically have contracts or agreements with consignors that outline the terms and conditions of the consignment arrangement. If there are disputes over issues such as pricing, payment, or return of consigned items, consignors may sue the store for breach of contract or other related claims. For example, if a consignor alleges that the store did not pay them the agreed-upon amount for a sold item, they may file a lawsuit against the store.
Insurance coverage: A consignment store can have professional liability insurance, also known as errors and omissions insurance, that provides coverage for claims arising from mistakes, negligence, or wrongful acts in their professional services, including consignment transactions. The insurance policy can help pay for legal defense costs, damages, or settlements related to contract disputes with consignors, subject to policy terms and conditions.
It's important to note that insurance coverage and the extent of protection can vary depending on the specific insurance policy, including policy limits, deductibles, and exclusions. Consignment stores should carefully review their insurance policies and work with insurance professionals to ensure they have appropriate coverage to protect against potential lawsuits and other risks.
Commercial Insurance And Business Industry Classification
- SIC CODE: 5932 Used Merchandise Stores
- NAICS CODE: 453310 Used Merchandise Stores
- Suggested Workers Compensation Code(s): 8017 Store - Retail NOC
Description for 5932: Used Merchandise Stores
Division G: Retail Trade | Major Group 59: Miscellaneous Retail | Industry Group 593: Used Merchandise Stores
5932 Used Merchandise Stores: This industry includes stores primarily engaged in the retail sale of used merchandise, antiques, and secondhand goods, such as clothing and shoes; furniture; books and rare manuscripts; musical instruments; office furniture; phonographs and phonograph records; and store fixtures and equipment. This industry also includes pawnshops. Dealers primarily engaged in selling used motor vehicles, trailers, and boats are classified in Major Group 55, and those selling used mobile homes are classified in Industry 5271. Establishments primarily selling used automobile parts and accessories are classified in Wholesale Trade, Industry 5015, and scrap and waste dealers are classified in Industry 5093. Establishments primarily engaged in automotive repair are classified in Services, Industry Group 753.
- Antique stores-retail
- Book stores, secondhand-retail
- Building materials, used-retail
- Clothing stores, secondhand-retail
- Furniture stores, secondhand-retail
- Furniture, antique-retail
- Glassware, antique-retail
- Home furnishing stores, secondhand-retail
- Home furnishings, antique-retail
- Manuscripts, rare-retail
- Musical instrument stores, second-hand-retail
- Objects of art, antique-retail
- Phonograph and phonograph record stores, secondhand-retail
- Shoe stores, secondhand-retail
Consignment Store Insurance - The Bottom Line
To discover the exact types of consignment store insurance policies you'll need, how much coverage you should carry and the cost, consult with a reputable broker that is experienced in commercial insurance.
Additional Resources Retail Insurance
Read valuable small business retail insurance policy information. In a retail business, you need to have the right type of commercial insurance coverage so that your store, employees, and inventory are protected.
- Adult Novelty
- Antique Dealers
- Appliance & Electronics Store
- Army Navy Surplus Stores
- Art Dealers
- Art Gallery
- Arts & Crafts Supply Stores
- Bicycle Shop
- Boat Dealers
- Book Store
- Bridal Shop
- Candy Confectionery Store
- Carpet Store
- Cell Phone Stores
- Clothing Store
- Collectibles Memorabilia Store
- Consignment Stores
- Convenience Store
- Cosmetics Store
- Costume Stores
- Dry Cleaning
- Embroidery Services
- Equipment Rental
- Fabric Stores
- Fish Markets
- Flea Markets
- Funeral Home
- Furniture Store
- Gift Store
- Greeting Card Stores
- Hardware Store
- Harness & Saddle Shops
- Home Improvement Store
- Infant, Baby & Children's Clothing Stores
- Jewelry Store
- Lamp Stores
- Lingerie Store
- Luggage Store
- Meat Market & Butcher Shop
- Men's Clothing Stores
- Music Store
- Office Supply Store
- Paint & Wallpaper Store
- Pawn Shop
- Pet Store
- Pharmacy Liability
- Plumbing Supplies Fixtures Store
- Poultry Dealers
- Rent To Own Stores
- Scrap Metal Dealers
- Sewing Store
- Shoe Store
- Sporting Goods Store
- Stationary Store
- Thrift Store
- Ticket Agency
- Tire Store
- Tobacco Store
- Toy Store
- Travel Agency
- Trophy Stores
- Tuxedo And Formal Wear Rental Store
- Vending Machine Operators
- Wig Store
- Women's Clothing Stores
- Specialty Retail Stores
The retail industry is a vital sector of the economy, providing goods and services to consumers across the globe. It is also a sector that is constantly evolving, with new technologies and trends emerging on a regular basis.
Despite its importance, the retail industry is not without its risks. Retail businesses face a variety of threats, including theft, damage to property, and liability issues. These risks can have significant financial consequences for retail businesses, which is why commercial insurance is so important.
Insurance can provide retailers with protection against financial loss resulting from unforeseen events. For example, if a retail store is damaged by a natural disaster, insurance can help cover the cost of repairs and help the business get back on its feet. Similarly, if a retail employee is injured on the job, insurance can help cover their medical expenses and any lost wages.
In addition to protecting against financial loss, commercial insurance can also help retail businesses protect their reputation. If a retail business is sued or faces other legal challenges, insurance can provide financial support and legal representation. This can help to protect the business's reputation and maintain customer trust.
Overall, insurance is an essential component of a successful retail business. It helps to safeguard against financial loss and protect against potential legal challenges, which can be especially important for smaller businesses that may not have the resources to absorb these types of losses.
By investing in business insurance, retail businesses can ensure that they are well-equipped to handle the many challenges that come with operating in this dynamic industry.
Minimum recommended small business insurance coverage: Business Personal Property, Business Income and Extra Expense, Equipment Breakdown, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits, Umbrella, Hired and Non-owned Auto & Workers Compensation.
Other commercial insurance policies to consider: Building, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Computer Fraud, Forgery, Bailees Customers, Goods in Transit, Jewelers Block, Cyber Liability, Employment-related Practices, Business Auto Liability and Physical Damage and Stop Gap Liability.